Star Manager Woodford Plans to Cut Borrowing -- WSJ
July 01 2019 - 2:02AM
Dow Jones News
By Paul J. Davies
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 1, 2019).
LONDON -- A fund run by star investor Neil Woodford is aiming to
slash its debt and pledged to recruit more independent directors to
its board while it attempts to assuage investor concerns over the
value of its investments.
The near GBP1 billion Woodford Patient Capital Trust, a U.K.
listed closed-end fund, was the subject of an article by The Wall
Street Journal article this week that detailed the growth in its
borrowing over recent years and its increasing exposure to risky,
young companies, most of which don't have publicly traded
shares.
The big risks faced by its lender, U.S. bank Northern Trust
Corp., and its investors is that the majority of the companies it
owns are also owned by Mr. Woodford's GBP3.7 billion ($4.7 billion)
mutual fund, which has been forced to suspend withdrawals while it
sells down assets to generate cash to repay investors.
Mr. Woodford built a reputation for making winning, contrarian
bets on large, unloved stocks over 25 years at U.S. company Invesco
Perpetual. But his eponymous investment empire built after he left
Invesco in 2013 is now in serious trouble as clients have fled and
U.K. regulators have launched an investigation.
Chicago-based Northern Trust has lent up to GBP150 million to
the Patient Capital Trust as it progressively lifted the limits on
how much of the fund could be invested in private, unlisted
companies. The Trust said Friday it had already reduced the loan
size to GBP126 million. It also said it would cut that to less than
half its former level within six months and eliminate it entirely
within a year.
That would bring it in line with the practice of other similar
U.K. funds, which don't use long-term leverage, and mark a return
to its own original investment policies.
The trust also attempted to reassure investors about the value
of the companies in which it owns stakes. It said the holdings were
assessed independently by a third party, IHS Markit, which
conducted in-depth work twice a year, or whenever a transaction
involving an investment occurred.
It also said sales by Woodford's suspended fund might not mean
losses on the value of companies held by the trust. Referring to
International Private Equity and Venture Capital Valuation
Guidelines, the trust said: "In the case of a 'forced transaction,'
it is not necessarily expected that the [trust's] assets would be
marked to the same value."
Several members of the trust's board are linked to companies
that the trust or other Woodford funds have invested in. The board
insisted it was independent, but would also seek to bring in more
independent nonexecutives.
Shares in the trust fell 2.6% and are trading at a discount of
one third to its net asset value.
Northern Trust said: "We do not expect a loss with the loan to
Woodford Patient Capital Trust, partly due to the collateral
supporting the exposure, which is currently valued in excess of 500
percent of the outstanding loan exposure."
Write to Paul J. Davies at paul.davies@wsj.com
(END) Dow Jones Newswires
July 01, 2019 02:47 ET (06:47 GMT)
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